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2011 (7) TMI 394 - HC - CustomsExport of menthol based products within the meaning of the Foreign Trade Policy - Petitioner submitted that the Deputy Commissioner of Customs, while raising his queries upon the filing of a Bill of Entry for home consumption, must restrict himself to the observance of the conditions which are stipulated in the policy read with the Handbook of Procedures - Deputy Commissioner of Customs would be justified in ascertaining whether the condition of nexus as stipulated in the DFCE Certificate and in paragraph 3.2.6A of the Handbook of Procedures has been fulfilled - For the aforesaid reasons, have declined to accede to the challenge to the validity of paragraph 3.2.6 A of the Handbook of Procedure and to the legality of the restriction imposed in the DFCE Certificate that the goods imported must have a nexus with the product group of the exported product - The Fourth Respondent shall now take necessary steps in accordance with law, in pursuance of the observations contained in the judgment.
Issues Involved:
1. Validity of paragraph 3.2.6A of the Handbook of Procedures of the Foreign Trade Policy for 2002-2007. 2. Legality of the restriction imposed in the DFCE Certificate requiring a nexus with the product group of the exported product. Detailed Analysis: 1. Validity of paragraph 3.2.6A of the Handbook of Procedures of the Foreign Trade Policy for 2002-2007: The Petitioner challenged paragraph 3.2.6A of the Handbook of Procedures, which mandates a nexus between the goods imported under the Duty Free Credit Entitlement (DFCE) Scheme and the product group of the exported goods. The Petitioner argued that this requirement is ultra vires para 3.7.2.1 (vi) of the Foreign Trade Policy and the Exemption Notification (53/03) under Section 25 of the Customs Act, 1962. The Petitioner contended that the Director General of Foreign Trade (DGFT), while issuing the Handbook of Procedures, cannot modify the policy but only make procedural provisions for its implementation. They asserted that the Handbook's imposition of a nexus requirement effectively curtails the range of goods that can be imported under the policy, which is beyond the DGFT's authority. The Court analyzed the statutory framework, noting that Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, empowers the Central Government to formulate and amend the export and import policy. The DGFT, under Section 6, is responsible for implementing the policy but cannot amend it. Paragraph 2.4 of the EXIM Policy allows the DGFT to specify procedures for implementing the policy, which are included in the Handbook of Procedures. The Court held that the Handbook of Procedures supplements the EXIM Policy and contains relevant procedures and other details necessary for its implementation. The requirement of a nexus between the goods imported and the product group of the goods exported is a procedural detail that ensures the effective implementation of the policy. This requirement does not amend the policy but facilitates its objective of accelerating export growth. Therefore, the Court concluded that paragraph 3.2.6A of the Handbook of Procedures is not ultra vires the Foreign Trade Policy. 2. Legality of the restriction imposed in the DFCE Certificate requiring a nexus with the product group of the exported product: The Petitioner also challenged the legality of the restriction in the DFCE Certificate, which requires that the imported goods must have a nexus with the product group of the exported goods. The Petitioner argued that this restriction is not stipulated in the Foreign Trade Policy and is therefore ultra vires. The Court noted that the Foreign Trade Policy's Clause 3.7.2.1 (vi) introduced an actual user condition, allowing the import of inputs for use in the importer's own factory or the factory of an associate/supporting manufacturer/job worker. The policy and the Handbook of Procedures form a composite scheme, and the Handbook's provisions are intended to implement the policy effectively. The requirement of a nexus between the imported goods and the product group of the exported goods aligns with the policy's objective and ensures that the benefits of the scheme are not misused. The Court held that the restriction in the DFCE Certificate is a procedural requirement that supplements the policy and ensures its effective implementation. It is not an amendment to the policy but a necessary condition to achieve the policy's objectives. Therefore, the restriction is not ultra vires the Foreign Trade Policy or the Exemption Notification under Section 25 of the Customs Act, 1962. Conclusion: The Court dismissed the Petition, upholding the validity of paragraph 3.2.6A of the Handbook of Procedures and the legality of the restriction in the DFCE Certificate requiring a nexus with the product group of the exported goods. The Deputy Commissioner of Customs is justified in verifying the fulfillment of this condition when processing the Bill of Entry for home consumption. The Petition was disposed of with no order as to costs.
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